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Friday, August 17, 2012

I want to talk about the human
propensity for stupidity, by first discussing a small family of
viruses which ignore humans completely, the Potyviridae. These five
related parasites, 100th the size of bacteria, do not
infect humans, but they do infect and quickly kill lilies – after
all, the word virus is Latin for poison. In response, lilies evolved
the tulip, resistant enough to the Potyviridae that they could
reproduce for perhaps a dozen generations more or less before
succumbing to the miniature succubus. And that's when humans come into
the picture, because long before humans knew there was such thing as
a virus, they found a way to ruin their own lives, and the lives of
thousands of their fellows, by using Potyviridae.

See, tulips evolved from lilies where
Europe blends into Asia, in the Ferghana Basin, north of Afghanistan,
east of the Caspian Sea and west of Lake Balkhash. The basin is
surrounded by mountains, and in this isolated test tube 36 different
varieties of wild tulips developed over a few thousand years. Some
had multiple stalks and blooms, some only one. The blooms could be
white, red, yellow or orange. And when infected with Potyviridae the
blooms would be wildly stained as if a child had asymmetrically
dripped paint over them. Then, the unexpected happened. In the 8th
century, humans living in the Ferghana Basin converted to Islam, and
tulip seeds and bulbs were transported westward to Islamic centers,
as a beautiful curiosity, the more so because of the fanciful
patterns they displayed when infected by Potyviridea, which traveled
with its host. And because the bulbs had to be transported thousands
of miles, because they were purely ornamental, and because they had
to be replaced every few years, to own and grow them became a display
of extreme wealth, conspicuous consumption, restricted to the
caliphs in Baghdad and later Istanbul.

A century after Christopher Columbus –
in 1593 - tulip bulbs were first planted in the Netherlands, by the
botanist Carolus Clusius. His wealthy patrons were for the first time
in history, not blue-blood royalty but the local burgomasters of
the the town of Leiden, the Netherlands. Recently freed from paying
protection money to Spanish royalty, these Dutch Protestant
capitalists were interested in just two things, making money, and
showing everybody how much money they were making. The “Nouveau
riche” adopted all the accouterments of their noble predecessors,
including fine clothes, large homes, fancy carriages, portraits, and
within ten years, ownership of the exotic tulip, so named because its
bloom resembled a Turkish turban. And it was now that human stupidity
enters our story, when tulips pass from being a de rigueur symbol of
wealth, to the means for achieving wealth.

The Lord, it seemed, had designed the
tulip to make humans rich, and a few Calvinist ministers pointed this
out. The plant blooms for only a week or two in the spring. And
having proven its colors, after the leaves have died back, the bulb
may be dug up, marketed and sold, before being returned to the soil
for the winter. So the primary tulip market was set by the plant
itself, every spring. The rest of the year traders would buy and
sell future contracts on the bulbs in the ground, gambling on their
future vitality. This market began to drive the price upward, until,
within twenty years of Clusius' experiment - in 1610 - the
burgomasters felt required to make it illegal to sell tulip futures
“short”, meaning to gamble that the price for bulbs in the ground
would drop before spring.

A disaster in the tulip trade was
predictable as far back as the summer of 1623, when a bulb of the
rare variety (only 10 existed), Semper Augusttus, was sold for a
thousand guilders. The most skilled carpenters earned only 250
guilders a year, and Carolus Clusius, the man responsible for all of
this, earned a mere 750 guilders a year. But when the bulb of the
Semper Augusttus (above) was pulled from the ground, it was found to have two
“daughter” bulbs, meaning the value of each Semper Augusttus bulb
had just been reduced by 15%. The buyer was the fabulously rich
Adriaan Pauw, and he was not happy, even though he now owned all 12.

The law against selling tulips short
had been reaffirmed in 1621, and again in 1630, and yet again in 1636.
So short selling was going on, and some burgomasters saw it as
dangerous. At the same time it seems safe to assume there was
resistance to enforcing such laws, since no penalties were ever
attached to a violation. It reminds me of the current toothless
regulation of the banking industry in America. The general feeling
seems to have been that everybody could continue making money as long
as everybody stayed greedy but smart. And that has never happened in
all of human history, and it did not happen in the Netherlands in the
17th century, first because the traders were not trading in what they thought they were trading in - tulips, but a virus which infected tulips, and second I remind you again of a central theme in
many of my essays; greed makes you stupid.

Adriaan Pauw was smart. He was rich
enough he did not need to be greedy with his tulips. He kept the
value of his Semper Augusttus high by the simple expedient of not
selling his bulbs, which prevented anybody from noticing that they got weaker with each generation. But he did go to the expense of constructing a
gazebo in his garden, covered in mirrors, to reflect his blooms
during their brief existence. It also more than doubled the
impression of his wealth. In 1624 Pauw's Augusttus were valued at
1,200 guilders each, then 2,000, and in 1626 at 3,000 guilders for a
single bulb. By 1633 each bulb of Augusttus, which had continued to
produce “daughters”, was valued at 5,500 guilders. And finally
Pauw could resist temptation no more. He only sold one at that price,
and with the stipulation that it could be re- sold only with his
approval. But inflation had spread like a virus to all varieties
of tulips. During one two year period the price for “General of
Generals” bulbs increased from 100 guilders to 750 guilders. On
February 5, 1637 at an auction held in the lake side fortress village
of Alkmarr, an Admiral van Enkhuizen bulb, was sold for 5, 200
guilders, several million American dollars today. Who could resist
such temptation?

That single auction, saw 70 rare bulbs
sold for 53,000 guilders, an all time high. But just two days earlier
and 20 miles to the south in the village of Harrlem a tulip investor
and grower club – called a college – had become so worried about
these rising prices that they decided to test the market. They held
an auction of a huge quantity of common bulbs. They meant to see how
deep the demand really was. The experiment blew up in their faces.
Only one buyer showed up. Realizing he was the market, he demanded a
35 % discount. And he got it. And when word of this disaster reached
Alkmarr and beyond, a stunned silence settled over tulip colleges all
over the Netherlands. Prices of tulips collapsed like the price of baseball trading cards or comic books after 2007. Many varieties of tulips would quickly lose 95% of their
value.

Families went bankrupt - how many has become a subject for much debate in economic circles. But may victims sought a
new start in the New World. Said one Calvinist, it was “ God’s
Just Plague-Punishment, for the attention of the well-to-do
Netherlanders in this bold, rotten Century.” It was the usual, "Heads, God wins; tails human lose" philosophy.
There were lawsuits, and everybody wanted out of their futures
contracts. The government tried to help, but any new law saving
buyers was opposed by sellers, and any new law favoring sellers was
opposed by buyers. So the politicians did nothing. The very wealthy Adriaan
Pauw's fortune survived, although he did take a hit. And most futures
contracts were quietly closed out for 10-15% of their paper value.

A lot of people have tried to claim the
Tulip Mania was not a “market bubble”, like all the other
market bubbles since. But the best description of what went wrong that I
have found was by A Maurits van der Veen, from the College of
William and Mary. (http://www.maurits.net/Research/TulipMania.pdf
) He wrote in 2009, “When novice traders entered the market...it
became increasingly difficult to distinguish those with solid private
knowledge from those who were simply following the crowd... these
constituted a new kind of trade, no longer linked to individual
bulbs.” In other words, greed driven investors were betting not on tulips, but tulip investors - call it tulip derevitives. And that had
blown the market up. Sounds like a market bubble to me. And when Tulip mania died, so did some of the
most valuable strains of tulips. There has not been a Semper
Augusttus bloom seen since the middle of the 17th century.

There are many who still insist the Semper
Augusttus was the most beautiful tulip that ever existed, as there
are many who insist an unregulated “free market” is superior to
a regulated stock market. But with its asymmetrical and varied
patterns the Semper Augusttus was actually the product of
Potyviridae devouring the tulip from the inside, breaking its genetic
code, and slowly killing its host. It was not a true species. It
lived no longer than the rich man who had the fortune to maintain its
artificial existence. Modern tulips are far stronger, their colors symmetrical, and more resistant than
the frail infected flowers that so entranced the “Nouveau riche”
of 1637. And because of that, billions of people today enjoy
tulips And some day, perhaps, the nouveau rich of our age will come
to admit that like the Potyviridea infected tulip, an unregulated
“free market”, which produced the tulip mania and a thousand
other manias and bubbles in the 400 years since, is merely a splash
of color which distracts your attention from the parasite devouring
capitalism right before your eyes.

Wednesday, August 15, 2012

I guess it was inevitable that once
these two met, their relationship would turn from unpleasant to
downright ugly. Widow Jane Leland Stanford was a rigid, humorless,
devoted temperance adherent who worshiped a vengeful God. She was
described by an acquaintance as a lady with “ an assured position in the social and
financial world." In other words, she was born with a stick up
her bum, and after the death of her husband, she exchanged the
wood for steel. Her antagonist, Ashley David Montague Cooper, was
what was once politely called a bohemian, but more accurately he was
a hedonist, an inveterate gambler, a constant drunk, a profligate
womanizer, and an atheist. He was also a very good painter. About the only
thing these two agreed upon was that if there was a hell, then A.D. Cooper going there in a hand cart. And it was fitting that their
relationship, such as it was, sank completely when it ran aground on
her rocks.

Jane Stanford's jewelry collection was
the guilt on the gilded age. During her lifetime she was known as
the queen of diamonds, and her private hoard remains famous to this day
because after her husband died in 1892 the United States government
slapped a $15 million tax lien (half a billion in 2012 dollars) on his
estate. Jane refused to pay even a portion of it,
even though the drawn out legal battle threatened to destroy the
memorial to her only child.

The story that Stanford University was
founded when Harvard rejected Leland Stanford Jr. is a myth. The
reality was that in 1884, when he was sixteen, the boy's doting
parents rewarded Junior with a “grand tour” of Europe. It was while exploring the temples of Greece that the boy contracted typhus, and he died
in Florence, Italy. The parents were heartbroken, and the little
comfort Jane's husband could offer was to tell her, “Now, all of
California will be our child”. He might have actually said that, as reason for founding the University that bares his name. Stanford University was supposed to be free for all qualified students,
women admitted equally with men, and to “qualify students for
personal success and direct usefulness in life.” And when the cold
hearted tax collectors prevented Jane from transferring money to the university, Jane
decided to sell her bling to keep the young university afloat. But
first, she thought it would be a good idea to memorialize her donation. Consider it a sales pitch.

She carefully arraigned the 34 diamond
studded tiaras, necklaces, cameos, bracelets, rings, ear rings,
lockets, watches, diadems and other assorted brick-a-brack, on a red
velvet piano cover, and had it photographed. And then, because the
resultant black and white image (above) did not do justice to the $100,000.00
($3 million today) collection, Jane decided to have the jewelery
painted. In the spring of 1898 she hired the most talented (and
expensive) painter she could find, Ashley David Montague Cooper. The
idea of donating what she intending on paying Cooper, to the cash
strapped university, never seems to have occurred to the lady.

By the time he was thirty, A.D. had
already painted the President's official portrait – U.S. Grant. But
his most famous painting was titled “Inquest on the Plains” and
depicted a small circle of American buffalo in the snow, surrounding
a dead Indian warrior. Subtle was not A.D.'s approach to art. Said a
critic, “When he was good, he was brilliant; when he was bad, he
was laughable.” Most of his darkly romantic western allegories
were hanging in the finest homes from New York City to San Francisco.
His studies of nude females, on the other hand, were hanging over
most of the bars between San Francisco and his home and studio in
Santa Cruz. He used them to pay off his own and his friend's bar
bills. A.D. had many friends and he was generous to a fault. And that
may have been why, when the messenger arrived from Jane Stanford,
A.D. agreed to the climb up Nobb Hill to her 50 room San Francisco mansion.

The lady had a few rules. First, while
he was working on the still-life of her jewelry, A.D. was to wear
formal dress. Secondly, he was to arrive at work sober, and since no
alcohol was allowed on the premises, he was to do no drinking on the
job. To be certain that her rules were adhered to Jane's personal
secretary, Bertha Berner, was to be in the room at all times. A.D.
readily agreed, so Jane showed him the piano cover she had draped her
jewelry upon, and the jewelry itself. To be honest, it did not seem
like that complicated a job, a bit like asking Leonardo Da Vinci to
paint a rumpus room. It wasn't as if the dowager was going to be
looming over A.D. while he painted. The hedonist must have wondered,
what could go wrong?.

What went wrong with A.D.'s plan was Bertha Berner. She
was a slightly younger version of Jane Stanford; her hair locked down
in a tight white bun, her bedroom and office adjacent to Jane's
bedroom, upstairs. By A.D.'s second session with the hoard, once it
was clear Bertha was not going away, A.D. snapped. According to
Bertha, ““he rose … made a deep bow with a flourish, drew a
flask from his pocket, and took a drink. Then he said, ‘Now you
watch me put a little fire into that sapphire!’” Bertha probably
reported this transgression to her mistress. But judging the work in
progress, Jane decided to keep A.D. on the job and Bertha watching
over the work..

Twice over the next few weeks A.D.
became so inebriated Bertha had to be send him home. But climbing
back aboard the wagon each time, he returned and forged ahead,
memorializing this six foot by four foot record of wealth in every precise detail, until he
had finished. A.D. was paid and discharged, and the painting hung in Mrs. Stanford's mansion's art gallery. For a few days it seemed the intrusion of
the reprobate had been a mere bump in the broad serene calm which
normally pervaded the Stanford mansion.

Then one morning a policeman knocked on
the mansion's front door, delivering disturbing news. The officer
reported to Bertha that a duplicate of the jewelery painting, this
one on redwood, had appeared in the front window of a saloon in San
Jose. And worse, the items depicted were prominently identified on
the canvas to be the property of Jane Leland Stanford. It was like an advertisment for any theives looking for a new target. A.D. had even
showed the chutzpa to have boldly signed the copy.

What Jane Stanford supposedly said was
recorded by her faithful servant Bertha. "What a sad thing,”
she supposedly said. “All that talent, dulled by John Barleycorn.” She thereupon dispatched a servant and the police officer via the San
Francisco, San Jose, Monterrey Railroad to retrieve the copy of her
painting. A little cash smoothed the transfer of the art from the
saloon's window into the servant's hands, and it can be assumed that
some silver also made its way into the police officer's pocket. Three
hours later the copy was in Jane's hands, and promptly destroyed. And
in any normal household that would have been the end of the entire
affair.

It was not ended for Jane because,
first, as a temperance supporter she had been made a laughing stock
in front of her Nobb Hill sophisticates. And secondly, when Jane
traveled to London to sell her jewels, she learned the unpleasant
lesson all jewelry owners must eventually learn, about the difference
between an insurance value of diamonds and the market value.
Diamonds, it turns out, are for forever only until you try to sell
them. Jane found buyers for only about ten of the jewels in the
painting. Still that was enough to endow the University with $20, 000
a year to buy new books for the library. The fund is still being used
for that purpose today, and is called “The Jewel Fund”. Also
immediately upon her return to San Francisco Jane had A.D.'s original
painting taken down from her gallery and placed in storage. The queen
of diamonds found it too painful anymore to gaze upon her jewels.
The next year, 1898, the Supreme Court ruled for the Stanford estate,
and Jane no longer had to sell her diamonds.

A.D.'s original painting stayed in the
basement of the Stanford Nobb Hill mansion until Jane's death in
1905. The old lady died while hiding out in Hawaii. She was convinced
that someone was trying to poison her. The Hawaiian police suspected
strychnine, but most people considered that nonsense. Jane had left
Bertha $15,000 ( half a million today) and a house. Meanwhile the
vast majority of Jane Stanford's estate, about $40 million (over a
billion in today's dollars) went to the institution which bears her
only son's name, Leland Stanford Junior University.

Ashley David Montague Cooper continued
on his road to perdition, unimpeded by public disapproval or personal
regret until 1919, when at the age of 62 “grey-haired, but
stalwart and erect” the old reprobate married 36 year old Charlotte
George. The couple shared five happy years together until A.D. died
of tuberculosis, in September of 1924. Presumably he was exhausted. His painting of "Mrs. Stanford's Jewel Collection" was brought out of hiding after her death. Now considered "one of the most extraordinary still-lives of our time" it hangs in Cantor Arts Center on the Stanford University campus.

Sunday, August 12, 2012

I said earlier that I would not enjoyed being there at the first day of the march of Coxey’s Army because it was cold and raining. But the second day, Monday, March 25th, was worse. It actually snowed. Marching to the northwest, the Army only reached Louisville, Ohio, a distance of barely six miles. The New York Times noted, “When the sun rose…this morning (March 26th) not a soldier….was visible… Fifty-eight of them went to the police station, where they were given lodgings on the cold stone floor.”

"Oz, left to himself, smiled to think of his success in giving the Scarecrow and the Tin Woodman and the Lion exactly what they thought they wanted. "How can I help being a humbug," he said, "when all these people make me do things that everybody knows can't be done? It was easy to make the Scarecrow and the Lion and the Woodman happy, because they imagined I could do anything."1900 L. Frank Baum "The Wonderful Wizard of Oz"

The plan laid out by Coxey and Browne to get their hoped for 100,000 man army over the 800 miles of bad roads between Massillon, Ohio and Washington, D.C. was to cover an average of 15 miles each day. But it took three days, until Wednesday, March 27th, for the Army to cover the twenty-seven miles through Alliance, to the Quaker settlement of Salem, Ohio.

But with their arrival here things began improving – a little. The townspeople opened their homes and the weather turned warmer. However this last proved to be a two edged sword as on Friday, the 29th the army managed just ten miles through thick mud to Columbiana, where they were provided with 1,000 loaves of bread, or about ten for every man in Coxey’s Army.

The goal was to establish a basic routine. Each morning the Army would leave camp at 10:30 A.M., and sought to achieve about 15 miles per day. This plan of attack had been taken from the voluminous books detailing the Sherman’s march through Georgia, the Civil War dominating the culture of the 1890’s the way the history of World War Two dominates American culture today.

The “Army Of Peace” as Browne called it in his pamphlets, was organized following guidelines from the same sources. Each five men formed a "group", each designated by cloth badges. Twenty groups formed a "commune", five communes a "community", two communities a "canton" and two cantons formed a "division", commanded by a marshal. It must have looked extraordinarily impressive on paper, but when the paper army was replaced with eighty hungry and desperate men, the privates must have been tripping over their officers. The press corps had not failed to notice this touch of farce, and played it to the hilt. A half century later my mother would describe some unorganized ineffective endevour by saying, "They were spread out like Coxey's Army."

After camping overnight in East Palestine and then in Waterford, Ohio, on April first, the Army crossed into Pennsylvania and was warmly received in New Beaver. Their numbers had now increased to 137, and one more day’s march brought them to the outskirts of Pittsburg. The Pittsburg Commercial Gazette headlined on April 4th that “enthusiastic crowds greet the pilgrims of poverty”. That night the Army camped on a baseball field in the suburb of Allegheny. Carl Browne announced a parade to be held right through the center of town, but the city fathers said no. Browne complained to the press, “They have not treated us decently and have penned our men up like a lot of cattle.”

The police locked the gates of the ballpark trapping the army inside. But Coxey and Browne still made speeches standing on wagons in the center of the field, and the Gazette estimated that “15,000 to 20,000 people” stood outside the fence to hear. When the divisions formed in a steady drizzle the next morning, Browne announced that a local manufacturer had donated 500 pairs of shoes to the marchers. Noted the Gazette, “The army could hardly work its way through the crowd around the baseball grounds…” An impromptu parade was formed as the Army marched out of town. “All business had been suspended and everybody was out to see the army. ... “. By now the Army had grown to over 400 men.

For the first time national leaders began to take notice of the march. Secretary of Agriculture J. Sterling Morton described the marchers he had never seen, thusly; “If a life history of each individual in Coxey’s Army could be truthfully written, it would show, no doubt, that each of them has paid out, from birth to death, more money for tobacco, whiskey and beer, than for clothing, education, taxes and food all put together.” The press dutifully reported the Secretary’s opinion, but never asked the marchers themselves, as the Professor from Chicago had done, and they never bothered to report his findings, either.

At the same time the press had begun to hound family for dirt. Jacob Coxey’s father refused to talk to them anymore. But before he had reached that point they quoted him as describing his eldest son as “stiff necked” and “pig headed”, and one Jacob’s sisters described the warrior for the unemployed as “an embarrassment”. To listen to his family you might not know that Jacob Coxey was one of the wealthiest men in Ohio, not from inheritance but by the sweat of his own brow and brain.Snow now delayed the army’s progress over the mountains. Noted the New York Times on April 11th, Coxey's Commonweal Army is still encamped in a grove…and is likely to remain there some time unless the severe mountain storm prevailing subsides by noon to-morrow. The furious storm of last (night) continued though out the day.” Coxey himself had moved ahead into Maryland, to make arraignments for the future encampments, leaving Carl Browne in charge. And it quickly became evident that there was trouble brewing in the army.

The greatest threat to Coxey’s Army, it turned out, would be internal.

"Don't you dare to bite Toto! You ought to be ashamed of yourself, a big beast like you, to bite a poor little dog!"

"I didn't bite him," said the Lion, as he rubbed his nose with his paw where Dorothy had hit it. "No, but you tried to," she retorted. "You are nothing but a big coward." "I know it," said the Lion, hanging his head in shame. "I've always known it. But how can I help it?" 1900 L. Frank Baum "The Wonderful Wizard of Oz"